Recently, I caught up with Professor Don Sull, Senior Lecturer at MIT Sloan School of Management, to discuss strategy and execution best practices. This is the second and final post based on our Q&A.
From our discussion, Professor Sull and I came up with six questions executives should be asking themselves and their teams when developing their 2017 strategy.
1. Does my strategy have 3-5 top priorities?
At the end of the year, companies spend organizational resources to set their annual goals for the next year. But, once they’ve had the first cut at those goals, they often fail at the next step: getting the number of priorities down to three to five.
This is hard because it requires different teams to coordinate and have hard discussions, instead of throwing up a laundry list of priorities that might be in direct conflict with each other. However, it’s important that those conversations happen when strategic priorities are being set.
Only 55% of middle managers can name any of their company’s top priorities. Narrowing your number of top company priorities to 3-5 ensures everyone in the company—from executives all the way down—is clear on what to focus on. Having a handful of priorities is useful in and of itself because it’s easier to communicate and easier for people to remember.
2. What is the expected horizon for achieving the company’s strategic priorities?
Companies should pay attention to how far down the road they’re looking. A 10 year plan is visionary, but often hard to derive concrete next steps and execute.
When setting your company’s strategic priorities, you should look three to five years down the road. According to Professor Sull, looking a few years into the future allows organizations to articulate a strategy, set strategic priorities and give the organization roughly enough time to make a meaningful impact.
3. Are my strategic priorities maintaining a course of action or charting a new one?
Your strategic priorities for 2017 should be relatively new and exciting to the company. Often, companies put work that would normally get done anyway as a strategic priority. For instance, a strategic priority shouldn’t be maintaining a sales number. Instead, it should be around developing new sales competencies, such as launching an inside sales function.
A good rule-of-thumb for strategic priorities is: “this priority would fail if it weren’t a focus of the company”.
4. Do priorities align across the organization and support the overall strategy?
Strategic priorities need to stitch together a cohesive story. There is often misalignment vertically between corporate strategy groups and business units, as well as horizontally among the business units. In some organizations, there is no corporate strategy to align the businesses.
When asked to identify the single greatest challenge to executing their company’s strategy, 30% of managers cite failure to coordinate across units, and 40% cite failure to align. To solve for misalignment, each team or department’s strategic priorities should mutually reinforce one another to promote the overall strategy.
It’s not the case that every business unit is going to completely fit within the overall strategy of the company, but at a minimum they should not come be competing with each other.
5. Do my strategic priorities identify and address critical obstacles?
Having identified strategic priorities, companies need to lay the groundwork for achieving those priorities. Identifying critical obstacles enables companies to create a credible plan to execute on their strategy, and setting key metrics helps the company understand if it’s successful in overcoming those obstacles.
For example, a large multinational organization that wants to digitize its operations could have a strategic priority to build digital capabilities to keep up with its newer, more agile competitors. The next step should be identifying obstacles, such as currently having no digital capabilities, an archaic infrastructure and disorganized data. This way, executives can develop a plan to overcome these obstacles.
6. Do I have multiple progress metrics for each strategic priority?
When setting a strategic priority, identify more than one progress metric. According to Professor Sull, having a few progress metrics enables the company to “bob and weave a bit more” and not confine the organization to the wrong metric.
For example, if your strategic objective is to “Grow market presence,” you want to define a few key results that help you measure progress towards and achieve that objective, such as “Grow sales by 20%” and “Increase NPS by 15 points”.
Having a couple of different measures allows you to make progress and learn which metrics ultimately matter. Limiting the strategic priority to a single progress metric increases the risk of tunnel vision.
I hope that these six questions will help you and your leadership teams gear up for 2017 and begin your strategic planning processes. If you have any questions, please comment below – I’d love to hear your thoughts.